Our city is at a critical juncture in the subprime mortgage crisis. Our neighborhoods are seeing a perfect storm of stagnant wages, rising mortgage payments, and decreased home values, all of which are leading to a record level of delinquencies and foreclosures.
A look at subprime adjustable rate mortgages in New York City reveals a startling picture. Of the nearly 26,000 such mortgages examined in November by the Federal Reserve Bank of New York, only 57 percent were current, 12 percent were more than 60 days delinquent, and 19 percent were in foreclosure. One out of 40 homes in our city is in foreclosure proceedings, double the rate statewide.
Many neighborhoods in Queens and Brooklyn are being hit hard by this tsunami of defaults. Queens accounts for more than 20 percent of foreclosures statewide, and Brooklyn has more than 19 percent. These foreclosures can have devastating effects on families, communities, and the economy.
New Yorkers forced into foreclosure stand to lose many thousands of dollars in equity and get hit with substantial fees during the foreclosure process; neighborhoods suffer as foreclosures drive down home prices; and the city could see lost tax revenue and skyrocketing expenses for securing, policing, and disposing of abandoned properties.
At a field hearing on the subprime crisis I held last week at City Hall, my colleagues and I heard from numerous witnesses who said that many struggling homeowners do not know about programs available to help them.
Indeed, a Freddie Mac survey released in January showed that 58 percent of homeowners who are behind on their mortgages didn’t know that lenders may offer ways to help them keep their homes, and 56 percent didn’t know that they may be eligible for free loan counseling.
Programs for struggling homeowners can do a world of good, but only if people know about them. Clearly, we must do much more to spread the word that help for struggling homeowners is often just a phone call away.
Finally, the Bush Administration is beginning to take real action. The U.S. Treasury Department last week announced “Project Lifeline,” an agreement with six major mortgage companies to suspend foreclosure proceedings for 30 days for homeowners who are more than 90 days past due on their mortgages. The additional time is intended to allow homeowners and mortgage lenders to work out more affordable loan terms.
In addition, the federal government and the Hope Now Alliance have set up a hotline, 1-800-995-HOPE, which offers information about Project Lifeline and other programs; provides independent, non-profit mortgage counselors certified by the Department of Housing and Urban Development; and allows homeowners to connect directly to mortgage companies.
On the local level, the New York State Senate Democratic Conference, the State Banking Department, and the City Council have teamed up to create “Operation Protect Your Home,” a series of forums to bring together homeowners facing foreclosure and mortgage lenders and help them identify sustainable solutions for borrowers.
The meetings will take place in every borough in neighborhoods that are particularly vulnerable to predatory loans. A forum will be held in Queens on March 1 from noon to 8 p.m. at the Campus Magnet High School in Cambria Heights. Brooklyn’s forum will be on March 2 from noon to 7 p.m. at Medgar Evers College.
These outstanding programs could help avert financial disaster for thousands of New York City homeowners. However, it is also essential for the federal government to action to address the underlying causes of the subprime crisis, combat abuses in the mortgage lending market, and provide important protections to mortgage consumers and investors.
The House passed a series of strong bills last year that would, ensure that lenders don’t make loans to people who cannot afford them; allow families in bankruptcy proceedings to stay in their homes while new loan terms are worked out; provide protections for renters of foreclosed homes; help struggling borrowers refinance their mortgages and create a new, independent agency to oversee mortgage lenders, in much the same way that we currently regulate banks and other financial institutions.
These bills would go a long way toward ensuring that the subprime crisis does not happen again. I am hopeful that the Senate will pass them in the near future and that the Administration will act quickly to ensure that they are implemented.
Keeping people in their homes is good for everyone. Stemming the tide of the subprime tsunami will require a concerted effort from federal, state, and local governments, community and block associations, and friends and neighbors alike. We must all do our part to avert a disaster that is hitting much too close to home.
Representative Carolyn B. Maloney represents western Queens and the east side of Manhattan in Congress. She is Chair of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, which has jurisdiction over our nation’s banking and lending institutions, including mortgage lenders.
